Mewing v Duncan
[2018] QDC 52
•29 March 2018
DISTRICT COURT OF QUEENSLAND
CITATION:
Mewing v Duncan [2018] QDC 52
PARTIES:
MICHAEL PATRICK MEWING and ANN MAREE MEWING
(applicants)
v
SHARON ROSANNE DUNCAN
(respondent)
FILE NO/S:
D4353/2017
DIVISION:
PROCEEDING:
Originating application
ORIGINATING COURT:
District Court Brisbane
DELIVERED ON:
29 March 2018
DELIVERED AT:
Brisbane
HEARING DATE:
11 December 2017
JUDGE:
McGill SC DCJ
ORDER:
Further hearing of application adjourned to a date to be fixed.
CATCHWORDS:
VENDOR AND PURCHASER – Between contract and completion – frustration – effect of domestic violence to purchaser – contract not frustrated.
VENDOR AND PURCHASER – Termination of contract – whether contract subject to finance – whether vendors estopped – whether reasonable steps taken to secure finance – adequacy of evidence.
Austin v Sheldon [1974] 2 NSWLR 661 – cited.
British Traders Insurance Co Ltd v Monson (1964) 111 CLR 86 – cited.
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 – cited.
Cudgegong Australia Pty Ltd v Transport for NSW [2014] NSWLEC 19 – cited.
Ezishop.net Ltd v Veremu Pty Ltd [2003] NSWSC 156 – cited.
Finlayson v Finlayson (2002) 29 Fam LR 460 – applied.
Gould v Kemp (1834) 2 My & K 304, 39 ER 959 – cited.
Hillingdon Estates Co v Stonefield Estates Ltd [1952] Ch 627 – cited.
Holland v Goltrans Pty Ltd [1984] 1 Qd R 18 – cited.
Lindsay-Owen v Associated Dairies Pty Ltd [2000] NSWSC 1095 – cited.
Marshall v Glanvill [1917] 2 KB 87 – considered.
Morgan v Manser [1948] 1 KB 184 – considered.
Scanlan’s New Neon Ltd v Tooheys Ltd (1943) 67 CLR 169 – considered.
SJR Investment Co Pty Ltd v Housing Commission of Victoria [1971] VR 211 – cited.
Wong Lai Ying v Chinachem Investment Co Ltd (1979) 13 Build LR 81 – cited.COUNSEL:
CA Hargraves (Solicitor) for the applicant
The respondent appeared in person
SOLICITORS:
Batch Mewing Lawyers for the applicants
The respondent was not legally represented
By an originating application filed 14 November 2017 the applicants seek a declaration that they are entitled to receive the deposit paid under a contract for the sale of land between the applicants and the respondent, and an order for payment of that deposit to the applicants. They also seek an order that the deposit be paid out of court to the applicants by way of their solicitor’s trust account, together with interest and costs.[1] The applicants’ case is that in the circumstances they were entitled to terminate the contract and forfeit the deposit because of the default of the respondent, the purchaser under the contract. The respondent disputes that proposition.
[1]The real estate agent paid the deposit into court on 24 November 2017, pursuant to the Agents Financial Administration Act 2014 s 28.
The respondent was not legally represented before me, and during the hearing I was wary about whether I could properly decide, without the benefit of the submissions from a lawyer on behalf of the respondent, in what is in substance a summary way, issues raised in the material before me. The question is whether, under the contract between the parties and in the events that have happened, the applicants are entitled to the deposit paid by the respondent. There are three possible outcomes: the applicants are entitled to the deposit; the respondent is entitled to the deposit back; or there are issues cannot be properly resolved in a summary way on the material currently before the court, in which case it would be appropriate to give directions, which may involve that the proceeding continue as if commenced by claim.
Background
On 20 November 2016 a contract for the sale of a particular property was entered into between the applicants as sellers and the respondent as buyer.[2] The contract was in the form of the 12th edition contract for houses and residential land approved by the Queensland Law Society and the REIQ. It identified the parties and solicitors for each of them, the property and the purchase price and the amount of the deposit, $20,000.00, to be held in the trust account of the applicants’ real estate agent.
[2]Affidavit of Mewing filed 14 November 2017 Exhibit MPM1.
On the third page of the schedule to the contract, under the heading “Finance”, after “finance amount” were inserted the words “sufficient to complete,” and after “financier,” the words “buyer’s choice”. There was no date inserted after “finance date”. To the right of the first of these entries there is on the printed form, apparently as an instruction: “Unless all of ‘finance amount’, ‘financier’, and ‘finance date’ are completed, this contract is not subject to finance and clause 3 does not apply.”
For completeness, clause 3 provided as follows:
“3.1 This contract is conditional on the buyer obtaining approval of a loan for the finance amount from the financier by the finance date on terms satisfactory to the buyer. The buyer must take all reasonable steps to obtain approval.
3.2 The buyer must give notice to the seller that:
(1) approval has not been obtained by the finance date and the buyer terminates this contract; or
(2) the finance condition has been either satisfied or waived by the buyer.
3.3 The seller may terminate this contract by notice to the buyer if notice is not give under clause 3.2 by 5 pm on the finance date. This is the seller’s only remedy for the buyer’s failure to give notice.
3.4 The seller’s right under clause 3.3 is subject to the buyer’s continuing right to give written notice to the seller of satisfaction, termination or waiver pursuant to clause 3.2.”
The contract provided for settlement ten days from the contract date, that is, on 30 November 2016. I was told during the hearing, although there was no proper evidence of this, that there had previously been a contract between the parties for the sale of this land, and this contract in substance replaced the earlier contract. That could also explain how it came about that the finance date was not completed. This was not the only deficiency in dating in the contract. Although the schedule disclosed there was a pool on the land and that there was no compliance or exemption certificate for the pool at the time of the contract, so that clause 4.2 of the contract applied, there was no date inserted as the “pool safety inspection date.” Under clause 4.2 (3) the buyer was responsible for arranging an inspection by a pool safety inspector at the buyer’s cost. The clause went on to provide that if the pool safety certificate had not been issued by the pool safety inspection date, the buyer could give notice to the seller terminating the contract, or waiving clause 4.2.
Failure to settle
On 28 November 2016 solicitors for the respondent wrote to the solicitors handling the conveyance for the applicants a letter which appears to be in a standard form, and indeed to have been written without having actually read the contract.[3] On 29 November 2016 the applicants’ solicitors sent an email to the respondent’s solicitor,[4] and there was a further email on 30 November 2016 enclosing a copy of the signed transfer and a settlement statement, and confirming that they were ready to settle at 2 pm that day.[5] Later on 30 November 2016 however, the solicitors for the purchaser sent a letter by email referring to the circumstances of the respondent and saying that this had prevented her from working or from undertaking usual commercial activities, with the result that she had been unable to obtain finance to complete the transaction.[6] They purported to terminate the contract under clause 3.1 on the basis that the respondent had been unable to obtain finance.
[3]Affidavit of Mifsud filed 14 November 2017 exhibit BM3
[4]Ibid exhibit BM4
[5]Ibid exhibit BM5
[6]Ibid exhibit BM6
The letter acknowledged that the finance date had not been completed, but said that the respondent told the estate agent that the contract was to be subject to finance, and relied on the agent to insert the required details in the reference schedule. So the omission of the finance date was due to the respondent’s reliance on the applicants’ real estate agent to have properly completed the contract in this respect.
On the hearing the respondent read an affidavit which she had apparently produced herself. In it she deposed to the fact that on the afternoon of 20 November 2016, the day on which the contract was signed, after events involving domestic violence, she resided with her children in a women’s refuge. The following day an application was made to a Magistrates Court for a protection order, two days later a temporary protection order was made, and a final protection was made on 14 December 2016. A copy of what was said to be that order was exhibited, which identifies four children of the respondent, but their names have been blanked out. It does confirm that a protection order was made on 14 December 2016.
There was also exhibited to the affidavit an email from a police officer confirming that a statement was obtained from a particular child relating to an assault complaint against a male person. Again the names have been blanked out, but it is apparent that the email was sent to the respondent. The respondent deposed to having remained in the refuge for about ten days before travelling to central Queensland, and to being unable to settle because she had been subjected to extremely traumatic domestic violence. That is understandable in a practical sense, but the question is whether it gives her a defence to the applicants’ claim to be entitled to forfeit the deposit.
On the face of the contract, something of this nature does not provide an excuse for a failure to settle. The purchaser’s obligation under the contact was to pay the balance purchase price on the settlement date: clause 2.5 (1). The applicants’ deposed to their being ready, willing and able to settle on the settlement date, and there is no evidence to the contrary, so that on the face of it the contract was terminated because the buyer failed to pay the balance purchase price as required under the contract on that day. Time being of the essence of the contract (clause 6.1)[7] gave the applicants the right to terminate: clause 9.1. In those circumstances clause 9.4 (2) provided expressly that the applicants could forfeit the deposit and any interest earned.
[7]This was subject only to settlement being prevented by a natural disaster, as defined: clause 6.2. This does not assist the respondent.
Frustration
A contract can be terminated at law by frustration, if events occur which resulted in a situation fundamentally or radically different from that in contemplation when the contract was made.[8] It is established that frustration is not something which is readily found, because of the risk that it poses to the fundamental enforceability of contracts.[9] Hence even if performance of the contract has become impossible, the contract will not necessarily be frustrated, if in a practical sense one party may be taken to have assumed the risk of being unable to perform. The general rule is that a promisor takes the risk of an event happening which prevents performance of the promise.[10]
[8]Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337.
[9]Scanlan’s New Neon Ltd v TooheysLtd (1943) 67 CLR 169 at 187.
[10]Scanlan’s New Neon (supra) at 200.
More is required than hardship to the promisor, because of which in some circumstances a court will refuse equitable relief of specific performance. Relief on this ground has been granted in circumstances where there would be some particular burden on the defendant from an order for specific performance which would be unfair to impose on the defendant, and which outweighs any unfairness to the plaintiff in refusing to grant a remedy of specific performance that is prima facie available. This however does not have the effect of terminating the contract at law, but merely relegating the party to legal remedies in damages.[11] As a consequence of that, hardship in this context generally cannot be shown if enforcement of the contract would operate as harshly as having to pay damages.[12]
[11]Gould v Kemp (1834) 2 My & K 304 at 308, 39 ER 959 at 961.
[12]Spry “Equitable Remedies” (6th Edition) p. 199.
A contract will be frustrated if the continuing performance of the contract becomes illegal. In Marshall v Glanvill [1917] 2 KB 87 a contract of employment was held to have been determined by frustration in circumstances where the plaintiff had joined the Royal Flying Corps so that performance of the contract became unlawful under the Military Service Acts.[13] It has also been held that a contract which requires or involves the personal services of one party would be frustrated anyway simply because of the unavailability of that party if, for example, that party were called up for military service: Morgan v Manser [1948] 1 KB 184, where the plaintiff had a contract with the defendant, a music hall performer, to manage him for a term of ten years, which was held to have been frustrated when the defendant was called up for military service. It was said at p 191 by Streatfeild J: “If there is an event or change of circumstances which is so fundamental as to be regarded by the law as striking at the root of the contract as a whole, and as going beyond what was contemplated by the parties and such that, to hold the parties to the contract would be to bind them to terms which they would not have made had they contemplated that event or those circumstances, then the contract is frustrated by that event immediately… .”
[13]Another example of this was Codelfa (supra) where a court injunction had prevented the contractor from performing the contract in accordance with its terms.
That is a different situation from the position here. The contract in this case did not in terms require the respondent to do anything herself. As an unconditional contract, it did assume that she would take whatever steps were necessary to put her solicitors in funds to enable them to complete on the settlement day, but at least in theory none of this required any particular personal action on her part. Although one can understand that having to move out of her home into a domestic violence refuge would have been very disruptive to her, the respondent’s affidavit does not provide any details of exactly how this prevented her from being able to arrange to put her solicitors in funds to complete the contract. It does not, for example, explain how, at the time she signed the contract, she had in mind arranging finance necessary to complete in only ten days’ time, and why she was unable to do that.
A case on frustration which provides probably the best guide to the present situation is Finlayson v Finlayson (2002) 29 Fam LR 460. In this case a couple agreed to sell a house to their daughter and son-in-law, under which a deposit was paid and a loan was obtained from a bank prior to settlement, secured by a mortgage over the property, on the understanding that all repayments would be made by the purchasers. In addition on settlement part of the purchase price was to be advanced by the parents and secured by a second mortgage. There was considerable delay prior to settlement, during which time the husband and wife repaid a significant amount to the bank, but before settlement the relationship between the husband and wife broke down. One issue which arose in the ensuing litigation was whether the existence of the marriage between the purchasers was fundamental to the whole transaction, so that without it both the loan contract and the contract for the sale of land had been frustrated.
A finding of frustration at first instance was overturned on appeal. The court held that the continuation of the marriage between the purchasers, even if it was the common assumption of the parties, was not a state of affairs essential to the contract’s performance. Apart from the settlement being delayed for a period of two years or more, the contract was a conventional contract for the sale of land at an agreed market price determined by an independent valuer. The fact that the parties intended that the property be a matrimonial home did not mean that it was frustrated when the need for a matrimonial home went away, nor was it to the point that without the availability of the loan from the parents the husband lacked the financial capacity to complete the contract. Accordingly, the court held that the continuation of the marriage was not essential to the performance of the contract, nor did its failure render the contract a thing radically different from that which was undertaken by the parties.
That is consistent with the general pattern of frustration decisions. The mere fact that in the circumstances a contract becomes less attractive to one party does not frustrate it. A contract for the provision of neon advertising signs was not frustrated by war-time restrictions on the illumination of them at night.[14] A contract with a shareholder to take further shares in the company was not frustrated by the fact that the company had become insolvent and subsequently gone into liquidation.[15] On the other hand, it was held that a contract for the sale of a dairy farm, which expressly included a milk quota with the land and equipment, which at the time was a valuable asset because of the prevailing dairy industry regulatory mechanism, was frustrated when milk quotas were subsequently abolished.[16] In that situation, apart from the fact that one of the assets to be sold had ceased to exist, this deregulation adversely affected the commercial viability of a dairy farm which had benefited from the previous system of regulation, so it affected the essential nature of what was being sold.
[14]Scanlan’s New Neon Ltd v Tooheys Ltd (supra).
[15]Ezishop.net Ltd v Veremu Pty Ltd [2003] NSWSC 156.
[16]Lindsay-Owen v Associated Dairies Pty Ltd [2000] NSWSC 1095.
It has been said that courts have been reluctant to extend the contractual doctrine of frustration to contracts involving land, because they involve the transfer of proprietary interests, and would be complicated because of the rule that termination by frustration is automatic.[17] There have however, been cases where the doctrine has been applied, for example, Wong Lai Ying v Chinachem Investment Co Ltd (1979) 13 Build LR 81, where a contract for the sale of flats in tower blocks to be constructed was held to be frustrated when a landslip seriously interrupted the building of the blocks, with the result that the construction would not be completed until well after the last date for completion specified in the contracts. It is established however, that the destruction by fire of improvements on land after a contract for the sale of the land will not frustrate the contract, because it is established that in such circumstances at common law the risk rests with the purchaser.[18]
[17]Lindgren et al, Contract Law in Australia (1986) para [2031].
[18]British Traders Insurance Co Ltd v Monson (1964) 111 CLR 86.
It has been held that the resumption of most of the land the subject of a contract led to the contract being frustrated, and so coming to an end, but the purchaser had a right to receive compensation for loss of its interest in the resumed part of the land: Austin v Sheldon [1974] 2 NSWLR 661. That decision was followed in Holland v Goltrans Pty Ltd [1984] 1 Qd R 18 at [19], where it was held that, despite the resumption of the land, the purchaser was entitled to the benefit of the claim for compensation subject to paying the unpaid purchase price to the vendor: p 20. The same result occurred in Cudgegong Australia Pty Ltd v Transport for NSW [2014] NSWLEC 19.
On the other hand, it has been held in England that the making of a compulsory purchase order in respect of property the subject of a contract for sale of land did not bring about a frustration of the contract, or indeed prevent the vendor from obtaining a decree of specific performance: Hillingdon Estates Co v Stonefield Estates Ltd [1952] Ch 627. In that case it was of significance, however, that under the relevant legislation the land remained the property of the vendor, and could still be conveyed to the purchaser, at all material times; the position may be different if the effect of legislation providing for the resumption of the land is that the land vests in the resuming authority prior to completion: SJR Investment Co Pty Ltd v Housing Commission of Victoria [1971] VR 211 at [214]. On this analysis, the fact that on settlement land is about to be vested in the resuming authority does not frustrate a contract for the sale of the land.
In the present case there is nothing to prevent the land being conveyed. I am not aware of any authority to the effect that the mere fact that the purchaser does not on the day fixed for completion in fact have available the amount necessary to settle frustrates a contract. If a contract is unconditional as to finance, in effect the purchaser undertakes the risk of not being able to assemble the necessary funds at the required time. If the present contract was subject to finance, the question is whether the respondent was unable to obtain finance as required by the contract despite reasonable efforts to do so, which entitled the purchaser to terminate the contract under the relevant provision; the issue of frustration therefore does not arise.
Subject to finance
There is a further difficulty with the current affidavit, in that it does not provide any evidence to back up the factual assertions made in the letter from the then solicitors for the respondent on 30 November 2016. In that letter it was asserted that the respondent had told the agent the contract was to be subject to finance, and relied on the agent to have completed the contract in such a way as to make it subject to finance. That the contract was not subject to finance was brought about by the fact that no finance date was inserted in the schedule, but if the respondent relied on the real estate agent to complete the contract in such a way as to render it subject to finance, the applicants may be estopped from denying that the contract was subject to finance, regardless of the written terms of the document.
Although the authority of the real estate agent as agent for the applicants was only to find a purchaser, it is an ordinary part of an estate agent’s responsibility in Queensland to prepare the contract for the sale of land, and to obtain from the purchaser that has been found a form of contract executed by the purchaser for submission to the vendor. That is evidently what occurred in the present case. In those circumstances, it is at least arguable that the agent was the agent of the applicants for the purposes of making representations as to the effect of the way in which they had completed the contract form, and if such a representation were made and were relied on by the respondent, it would be binding on the applicant. If that is the case, and if despite reasonable efforts to obtain satisfactory finance sufficient to complete the respondent had been unable to do so, the respondent would appear to have had a right to terminate the contract under clause 3. In the circumstances, it may be at least arguable that the purported termination by the then solicitors for the respondent on 30 November 2016 was effective, and the respondent is entitled to the return of the deposit.
At the present time there is however no evidence before me verifying the factual statements in the letter of 30 November, or otherwise laying an evidentiary foundation for the necessary factual matters to establish such an entitlement. It would be necessary for the respondent to show that the agent had been asked to make the contract subject to finance and that the agent had expressly, or perhaps impliedly, represented that the contract as completed by the agent was subject to finance, and that the respondent had relied on that representation in signing the contract in the form it was in when it was signed by her.
It would also be necessary for her to show that she had made reasonable efforts to obtain finance sufficient to enable her to complete. That would involve a consideration of just what steps she took with a view to arranging such finance after (and perhaps before) the contract was signed, and what particular impediments were placed in her way by the domestic disruption she suffered. It may well be relevant to take into account her personal situation when assessing whether she had made reasonable efforts to obtain satisfactory finance to enable her to complete, though the material in the current affidavit does not demonstrate that in her position it was reasonable for her to have taken no steps to obtain such finance, if that were the case.
It may be of course that the true situation is that, because of her changed personal situation, she no longer wanted to proceed with the purchase, because she did not want to enter into the necessary personal commitments. That however would not provide her with a defence of frustration of the contract, nor would it provide circumstances which exempted her from the obligation to take reasonable steps to obtain the finance necessary to complete the contract on terms satisfactory to her. That means on terms as to the provision of finance, terms between her and the financier, satisfactory to her.
In circumstances where the respondent is not legally represented, it may be that she did not appreciate the significance of such evidence, and the need to set out in her affidavit the necessary factual matters. I therefore propose to offer the respondent the opportunity to place further evidence before the court, if she wishes to do so, directed specifically to this issue. If she does do so, it will be necessary to consider whether, in the light of that evidence, the respondent may have a defence. If the respondent does take that opportunity, it will also be necessary for me to give the applicants a further opportunity to be heard in relation to it. If the respondent declines or fails to put forward further evidence, I will decide the matter on the basis of the current evidence. I therefore propose to publish these reasons, and adjourn the matter to give the respondent the opportunity of placing further material before the court. The matter cannot be finally decided at this time.
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